WHAT IS Welfare And Pension Plans Disclosure Act (WPPDA)
The Welfare Pensions Plan and Disclosure Act (WPPDA) was a 1950s-era law that gave the U.S. Department of Labor regulatory authority over private employee benefits plans for the first time. In an effort to increase transparency, the WPPDA mandated that employers and labor unions provide plan descriptions and financial reports to the government. It was intended to make plan sponsors more accountable to participants and beneficiaries for the financial health of the plans.
BREAKING DOWN Welfare And Pension Plans Disclosure Act (WPPDA)
The Welfare Pensions Plan and Disclosure Act required the Labor Department to file information about all pension plans with more than 25 employees participating. It also required pension plans that totaled between 25 and 100 employees to file detailed descriptions about plan administration. Plans that had more than 100 participants need to file financial reports on an annual, in addition to providing relevant details about their plan.
A 1962 amendment to the Welfare Pensions Plan and Disclosure Act increased regulatory authority over the plans by giving the government enforcement interpretative and investigatory powers. The WPPDA was a precursor to the much broader Employee Retirement Income Security Act (ERISA), which replaced it in 1974.
How ERISA Expanded on the WPPDA
The Employee Retirement Income Security Act of 1974 protects Americans' retirement assets by implementing rules that qualified retirement plans must follow to ensure plan fiduciaries use plan assets appropriately. As outlined by ERISA, plans must provide participants with information about plan features and funding, and regularly produce relevant information free of charge.
ERISA adds to the requirements under the Welfare Pensions Plan and Disclosure Act by establishing standards of fiduciary duty, protecting the plan from mismanagement and increasing the rights of participants and beneficiaries. ERISA defines a fiduciary as anyone who exercises discretionary authority or control over a plan's management or assets, including anyone who provides investment advice to the plan. Fiduciaries who do not follow the principles of proper conduct may be held responsible for making up losses to the plan. In addition, ERISA addresses fiduciary provisions and bans the misuse of assets through this particular set of provisions.
In addition to keeping participants informed of their legal rights, ERISA grants participants the right to sue for benefits and breaches of fiduciary duty. To ensure participants do not lose their retirement contributions if a defined plan is terminated, ERISA guarantees payment of certain benefits through the Pension Benefit Guaranty Corporation, a federally charted corporation.